Brazil's interest to explore for oil in Cuban sector of Gulf of Mexico remains strong

July 28, 2003
During a recent visit to Brazil, Cuba's Vice-President Carlos Lage said that Brazil's President Luiz Inácio Lula da Silva expressed strong interest in accepting the Cuban government's earlier invitation to explore for oil in the Cuban sector of the Gulf of Mexico.

Peter Howard Wertheim
OGJ correspondent

RIO DE JANEIRO, July 28 -- During a recent visit to Brazil, Cuba's Vice-President Carlos Lage said that Brazil's President Luiz Inácio Lula da Silva expressed strong interest in accepting the Cuban government's earlier invitation to explore for oil in the Cuban sector of the Gulf of Mexico.

Tilden Santiago, Brazil's Cuban ambassador, said Lula had accepted an invitation to visit Cuba in September. The ambassador confirmed that Brazil was interested in exploring for oil in the gulf, but that the technical evaluation had to be completed by Brazilian state-owned oil company Petroleo Brasileiro SA (Petrobras).

"Petrobras's world-class technological expertise to find oil in ultradeep waters qualifies us to research for oil in the (Gulf of Mexico)," said Petrobras Pres. José Eduardo Dutra. The company, in partnerships with various other private oil firms, had a recent string of successful oil discoveries in the US sector of the gulf.

Expansion needed
"Petrobras needs to expand its activities on the international market. . .," Dutra said. "As other companies come into the sector, our main goals are related to geopolitics and to take advantage of what we do best: deepwater oil extraction. Therefore, we are going to make the Gulf of Mexico and West Africa our priorities," he added.

"We are keen to accept the Cuban government's invitation to explore oil in the Cuban sector of (gulf) and missions have been going to Cuba to evaluate the political, technical, and financial conditions and terms," a top Petrobras official, who requested anonymity, told OGJ.

Foreign companies participate in the development of Cuba's oil industry through risk exploration contracts. Under Cuban law, foreign companies that fail to find oil must absorb the financial loss themselves. But if they do find oil, a portion of it—usually 50%— is theirs to sell.

Repsol-YPF SA has signed on for six of the 1,250 sq mile deepwater blocks. And with each block costing as much as $50 million to prospect, about three times as much as a coastal, shallow-water well, the company will probably be looking for partners, a Repsol-YPF spokesperson told OGJ.

"US companies are not at a substantive disadvantage thus far with respect to not having an opportunity to export oil to Cuba or to explore for oil in Cuba," said John S. Kavulich II, president of the nonpartisan US-Cuba Trade and Economic Council Inc. in New York, told OGJ. "However, if usable quantities and usable quality of oil is discovered in the Gulf of Mexico areas controlled by Cuba, then most certainly there will be substantial pressure by US companies to seek authorization from the US government to compete for exploration rights, given the US government's goal of having the US become less dependent upon oil from the Middle East," he said. The Council provides reports to the US private sector about future investment opportunities in practically all of Cuba's economy.

Economic sanctions against Cuba are blocking promising ventures that could help enhance US energy security, create a diversified energy supply for Florida, help ease an expected shortage in US local refining capacity, and provide around $2-3 billion/year in new oil and gas revenue for US energy firms, said an independent report by the Cuba Policy Foundation, Washington, DC (OGJ Online, Dec.17, 2001).

During 1991-92, some $1 billion was invested in Cuba's oil sector causing a sixfold increase in oil production. Most of the investment came from foreign companies although in recent years Cuban state oil firm Cubapetroleo (Cupet) has begun to invest in oil exploration and production.